Insurable risks

Insurable risks are the type of risks in which the insurer makes provision for or insures against because it
is possible to collect, calculate and estimate the likely future losses. Insurable risks have previous
statistics which are used as a basis for estimating the premium. It holds out the prospect of loss but not
gain. The risks can be forecast and measured e.g. Motor insurance, marine insurance, life insurance etc.

This type of risk is the one in which the chance of occurrence can be deduced, from the available
information on the frequency of similar past occurrence.

Example

The probability (or chance) that a certain vehicle will be involved in an accident in year 2011 (out of the
total vehicle insured that year 2011) can be determined from the number of vehicles that were involved
in accidents in each of some previous years (out of the total vehicle insured those years).

The probability (or chance) that a man (or woman) of a certain age will die in the ensuring year can be
estimated by the fraction of people of that age that died in each of some previous years.